For the purpose of valuation of finished goods under Central Excise on which MRP is required to fixed and attracting the provision of Section 4A of the Central Excise Act, a question was arisen that:

"Whether quantity discount is allowed and no excise duty shall be charged on goods supplied as quantity discount".

Honorable Tribunal in the matter of M/s   INDICA LABORATORIES PVT. LTD. Versus COMMISSIONER OF C. EX., AHMEDABAD reported in 2007 -TMI - 1511 - CESTAT, AHMEDABAD has held that,

(a) Sale is not a necessary condition for charging to excise duty. Duty becomes payable (unless otherwise exempted) in respect of every removal of excisable goods.

(b) The concept of quantity discount applicable in the context of valuation under Section 4 is not applicable in determining value under Section 4A for the forgoing reasons.

(c) In the present case, the sale is for the gross quantity at the net price and the claimed free supply is not meant for the ultimate customer; such quantity claimed to be given also carried MRP. Therefore, duty shall be discharged on the entire quantity including goods covered as "the quantity discount" on the basis of valued arrived at under Section 4A after giving the abatement provided for.

(Also see: article on MRP based valuation)

MRP based valuation: quantity discounts excluded and duty assessed on entire removal under Section 4A. Where MRP based valuation under Section 4A applies, commercial concepts of quantity discount under Section 4 are not applicable; removal of goods attracts excise irrespective of sale, and if free units carry MRP and form part of the removed quantity, the assessable value and duty are to be determined on the entire quantity using the Section 4A valuation method after the statutory abatement.